E-Payments To The Last Mile

When the Central Bank of Nigeria introduced Mobile Money in Nigeria, the expectation was that the scheme would not only compete with the Traditional Banking system in Nigeria but would ultimately emasculate it for the betterment of the Nigerian economy where over 35% are still labelled as the un-banked with the volume and value of the uncaptured unbanked transactions projected to run into billions of naira.

It was seen as the masterstroke that would drive the economy by triggering the financial inclusion of the underserved who dwell at the bottom of the pyramid and who are either by choice or unwittingly excluded from the regular financial sector with EFiNA (Enhancing Financial Inclusion and Access) stating in their 2010 report that with over 40% of the adult population unbanked, financial exclusion poses major threats for the Nigerian Economy.

On paper, the prospects are positively staggering. Nigeria has a population of 170 million people, twice the population of Kenya, the roaring success case in Mobile Money; Nigeria wields a better economy than the East African country and has been labelled Africa’s strongest economy despite their recent recessions and economic strangulations.

Mobile phone penetration placed the number of the operable phone lines in Nigeria to around 120 million signaling massive potential of mobile money in Nigeria. Mobile Money was also expected to employ a section of the population as agents thereby ameliorating the unemployment conundrum in Nigeria.

With these statistics in mind, the regulators upon rollout would have been pardoned for their massive expectations of mobile money.

This is an industry which on paper was expected to thrive.

However, seven years later, adoptions have been low, Mobile Money Operators have in some cases become disillusioned and while the value of transactions hits $4bn in 2015, the MMOs have found it hard to break even and get a return on investment and the numbers of the unbanked while it has recently been improved statistically is basically incremental.

This is mostly because of a palpable gap between expectation and delivery in the deployment of mobile money services in Nigeria. The blame is evenly shared by the government, the regulators and the MMOs in Nigeria.

SMS Printer MIL300 Mobile Money

Expectation and Promise

Mobile money has become so widespread in Kenya, the model, that it is accepted as a means of payment in the markets and even as a veritable means of paying for bribes in some circles. Mpesa, the company that rolled out the service boasts a subscriber base which is above half the size of the Kenyan population.

The expectation was that mobile money will effectively bridge the gap between the millions of people habiting both sides of the divide.

The government, the MMOs expected a seamless importation of structures, infrastructures, practices and results from Kenya.

It was a foolproof plan, all believed. It was not.

The Government promised full regulatory backing of the industry that will help the government reach its full capacity.

There would be a seriously-driven cashless policy configured to squeeze cash out of the daily transactions and operations.

However, the cashless policy of the government has been lukewarm at best and is only present on paper.

Cash is still on its throne as the paramount king and alternative channels are roundly discouraged.

Responding to an EFiNA focus group report, a respondent asked a rhetorical question “What are you doing in a Nigerian Market when you do not have cash?” This question emphasizes the place of cash in the day-to-day transactions.

The expectation was full rural and semi-rural communities driven solely by mobile money with the product targeted at the unbanked and the underserved who are mostly rural-dwellers.

However, in practice, the MMOs in search of quick gain and value have been playing in the same field with the banks, jostling for the same customer base within the fully-banked populations and offering synonymous services.

After all, like the stake holders later found out, Mobile Money may be critically needed in the rural areas but is a hard-sell in that section of the population fraught by illiteracy, palpable suspicion of the formal financial service providers and for all the vaunted impressive mobile penetration in Nigeria, lack of network connectivity.

In some of the critical communities, there is low network connection. The EFINA respondents even claimed that PAGA Mobile Money offering is only accessible via a smart phone.

This is an uncomfortable truism seeing that Mobile Money as a service should be for the hard-to-reach.

As Mr. Jero Omare-Ogah, MD/CEO of Fortis Mobile Money said in Netherlands during the “Money 202020” digital payment event, “The Mobile Money service is not for the urban dwellers but should be targeted at reaching the hard-to-reach people in dire need of the service with the ultimate goal being to progressively graduate them from financial inclusion to economic inclusion.”

According to him while differentiating between financial inclusion and economic inclusion, he pointed out that “Financial inclusion targets the inclusion of the unbanked ensuring that their contributions are reflected in the economy and that they enjoy financial services.”

Economic inclusion goes beyond that to include insuring that these financially included people grow to enjoy economic freedom through the provision of core services like mobile microfinancing and micro-insurance services.

According to him, this realization has informed his organization’s foray into the mobile microfinance space enabling individuals to access loans through their mobile phones. The expectation was that mobile money would plug the chasm of financial services in the hinterlands and deliver services like deposits and withdrawals (Cash in-Cash out), Bill Payments and loan services.

However, in reality, much depends on the mercies of the Agents who are independent and decides just who to serve.

In reality, Agents do not do much of deposits and withdrawals. Mobile Money Agents function mostly as auxiliaries of the Brick and Mortar Banks delivering services like wallet-to-bank transfers and bill payments.

The bulk of withdrawal transactions they do favor the banked and come in the form of POS withdrawals rather than cash-out.

The service as delivered through the agents have unstructured pricing and despite the best efforts of the MMOs like Fortis Mobile Money Limited who do a spot-check of Agent Locations to ensure that prices are adhered to, Agents are mostly independent and consider the interference of their partner MMOs to be invasive and unnecessary.

The effect of this is that the unbanked end-users have been priced out of the service that was initially targeted at them.

The Mobile Money Industry structure where the agents call the shots and the Mobile Money Operators beg cap-in-hand for their best services is not a part of the Kenyan Model. The expectation is interoperability; the reality is that MMOs exist in mutual suspicion of each other.

In the Nigerian Mobile Money Industry, it is the survival of the fittest.

The leverage which the agents enjoy is partly because of another expectation that was not delivered and that is the expectation of a massive Agency network strategically spread across locations from kiosks to super stores and from markets to hospitals.

However, the country has less than twenty-five thousand active agents to service over 40 million unbanked section of the population.

The theory stipulated 200 subscribers to an agent but there are millions of people without a servicing agent within miles. For all the work that The Government, The MMOs and the Industry Stakeholders have done, even more work needs to be done. The pace is slow, the expectation is yet to be matched, power rests on the very few agents and the MMOs desperately scramble to attain scale.

The government needs to spearhead this mobile money revolution by being firm with the cashless policy, a cap needs to be placed on cash transactions.

Then the MMOs needs to interface more with the people at the base of the pyramid, the unbanked.

This foray requires bravery but that is what mobile money is, Bravery. It would take bravery to refocus the organization from urban to rural without immediate gains.

A distinction would also need to be done between Mobile Money and Mobile Internet Banking, as a sizable number of people according to EFiNA reports do not know the difference.

Summarily, the way to get there is short. Government should be firm with favorable policies, MMO’s should be brave with their roll-out strategies and the rest of the stakeholders need to think deeper.

Above all, seven years after the introduction of Mobile Money in Nigeria, we must accept that this is not Kenya. This is Nigeria.